Non-domestic rating – Exemption – Agriculture — Schedule 5 to Local Government Finance Act 1988 – Land used as plant for production of mushroom compost containing mushroom mycelium – That product sold on to mushroom farmers for final stage of growing and harvesting mushrooms – Whether hereditament consisting of agricultural land or agricultural buildings qualifying for exemption from rates as market garden – Paras 1, 2(1)(d) and 3(b) of Schedule 5 – Exemption refused – Appeal dismissed
The appellant was the occupier of 10 ha of land located in the countryside at Leckford, Hampshire, on which it operated a plant for the production of mushroom compost containing mushroom mycelium. The process involved three phases, beginning with the creation of compost from locally supplied wheat straw, deep litter poultry compost and agricultural gypsum, followed by the addition of mushroom spawn and ending with the growth of mycelium strands. That material was then broken up and sold on to mushroom farms, where the mushrooms were finally grown and harvested. As part of its operation, the appellant constructed a reservoir, buildings, hardstanding, plant and other structures on the land; the most recent, dating from November 2010, was a large building containing nine insulated polytunnels, a filling hall and an emptying and dispatch hall, which enabled a high degree of atmospheric control of the building and automation of the processes.
From 2007 onwards, the appellant made a number of proposals to alter the entry for the property in the 2005 and 2010 non-domestic rating lists, contending that it was entitled to agricultural exemption from rates. The Valuation Tribunal accepted that contention, holding that the premises qualified for exemption as a “market garden” within the meaning of Schedule 5 to the Local Government Finance Act 1988, but that decision was reversed by the Upper Tribunal (UT) on an appeal by the respondent.
The UT held that the respondent’s premises did not qualify for exemption from rates as either: (i) “agricultural buildings” used for a market garden, within paras 1(b) and 3(b) of Schedule 5 to the 1988 Act, since the respondent did not produce mushrooms to be sold directly or indirectly to a member of the public for consumption, such that its operation was properly characterised as a nursery ground rather than a market garden; or (ii) “agricultural land” comprising “anything which consists of a market garden, nursery ground, orchard or allotment”, within paras 1(a) ad 2(1)(d) of Schedule 5, since that exemption did not cover buildings: see [2014] UKUT 159 (LC); [2014] PLSCS 164. The appellant appealed.
Held: The appeal was dismissed.
(1) For many years, the rating legislation had separately categorised market gardens and nursery grounds. That distinction was one of substance. The legislation imposed a different rating consequence for market gardens in which all the agricultural operations were undertaken in buildings, which were exempt from rates, and nurseries in which all the agricultural operations were undertaken in buildings, which were not exempt. What distinguished a market garden from a nursery ground was that a market garden produced such articles as fruit and vegetables for sale and for consumption directly or indirectly by the public, whereas the produce of a nursery was not suitable for, or not intended for, public consumption without some further process. The question was one of fact and degree and there would be some cases at the margins where the distinction between a market garden and nursery ground was not entirely straightforward. A hereditament was not a market garden if the produce of the hereditament was not intended directly or indirectly for consumption by the public but was instead to undergo further processes by a third party to turn it into something different. It was not enough that horticulture was carried on at the hereditament, with a view to ultimate consumption by the public, if the produce of the hereditament, when it left the hereditament, was not itself an article capable of consumption by the public or intended for such consumption: Watters v Hunter 1927 SC 310, Twygen v Assessor for Tayside Region 1991 SC 98 and Darlington & Sons (Holdings) Ltd v Langridge (VO) [1973] RA 207 applied; Purser v Local Board of Health for the District of Worthing (1887) 18 QBD 818 considered.
The sale of a consumable product in a market was an important facet of the notion of a market garden. The produce which left the appellant’s hereditament was neither consumable nor for sale directly or indirectly to the public. It was not in a form intended to be, or able to be, consumed by the public but was intended to be subject to further processes on a different hereditament before being capable of such consumption. For that reason, the hereditament was not a market garden but was instead a nursery ground for the purposes of Schedule 5.
(2) The appellant’s hereditament could not be categorised as “agricultural land” within paras 1(a) and 2(1)(d) of Schedule 5 since all the agricultural operations on the hereditament were undertaken in buildings. Although para 2(1)(d) included “anything which consists of… a nursery ground” within the definition of agricultural land, the word “anything” should not be read literally and the definition had to be taken to exclude buildings. The rating legislation had long made a distinction between agricultural land and buildings: Smith v Richmond [1898] 1 QB 683 (CA); [1899] AC 448 (HL), Gilmore (VO) v Baker-Carr [1962] 1 WLR 1165; (1962) 183 EG 691 and W & JB Eastwood Ltd v Herrod (VO) [1971] AC 160 applied. The distinction between agricultural land and agricultural buildings was clearly retained in Schedule 5. That being so, the use of the words “anything which consists of” in para 2(1)(d) could not have been intended to extend to nursery grounds the exemption which was provided for market gardens wholly comprising buildings. There was no obvious explanation as to why the legislation should confer exemption for rates on market gardens where all the agricultural activities were carried on in buildings, but not confer that exemption on nurseries where all the agricultural operations were carried on in buildings. Nonetheless, the statutory distinction between their treatment was clear and unambiguous.
Accordingly, the appellant’s hereditament did not attract exemption from rates since the buildings covering the hereditament, being a nursery, did not fall within the definition of “agricultural buildings” in para 3(b) of Schedule 5 and the hereditament itself, being covered by buildings, was not “agricultural land” within para 2(1)(d).
Gordon Nardell QC and James Burton (instructed by Michelmores LLP, of Exeter) appeared for the appellant; Sarabjit Singh (instructed by the legal department of HM Revenue and Customs) appeared for the respondent.
Sally Dobson, barrister
